The Fed Is Blowing More Bubbles

As if any more evidence were needed (see my CB post earlier this week) that the Fed has succeeded, either through ignorance or design, in igniting new asset bubbles throughout the economy, the Federal Reserve Bank of Kansas City just released a survey of bankers that confirms a continuing rise in U.S. farmland prices. The following chart shows the stratospheric year-over-year rise in non-irrigated cropland prices for 3Q 2012.

U.S. farmland prices

As reported by The Blaze, one analyst noted, “If this trend continues . . . these agricultural areas may very well become ‘New Manhattans’ (as far as wealth is concerned).” The chart below from the report by the Kansas City Fed puts this stunning trend in temporal perspective and reveals that it extends across all farmland, including irrigated cropland and ranchland.

all farmland prices


  1. Its because the FED’s policy has driven up commodity prices, which in turn drove up farmland prices. Investors were looking for income producing investments, which farmland is. The FED’s policies have destroyed most “safe” investments like savings, CDs, bonds, etc. With high commodity prices, farmers bid up farmland rental rates. That’s what started the bubble, because returns against the cost of the farmland was great. Ethanol production helped too. But even with the rental rates sky high, the farmland bubble is now crazy and unsustainable. Now the percent income from rental rates are no better than CDs, given the high cost of the farmland. The land cost has caught up with the rental rates.

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